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Treasury bill rates likely to decline on demand

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RATES OF THE Treasury bills (T-bill) on offer today are likely to decline further amid robust demand, driven by the downward movement of US Treasury yields as well as dovish remarks from the chief of the local central bank.

The Bureau of the Treasury is offering P15 billion worth of Treasury bills (T-bill) today, broken down into P4 billion and P5 billion for the three- and six-month papers, respectively, and P6 billion in the one-year tenor.

Two traders said yields on the T-bills on offer today will likely decline across all tenors versus rates at the previous auction.

“Rates will come down by five to 10 basis points (bp) from the previous auction. The T-bills auction will align with the secondary market because yields went down,” a bond trader said in a phone interview on Friday.

Last week, the Treasury borrowed P15 billion as planned at its T-bills auction, raking in tenders totalling P47.8 billion, more than thrice the amount it wanted to raise.

Rates of the 91-, 182- and 364-day papers went down to 5.15%, 5.59% and 5.683%, respectively.




Meanwhile, at the secondary market on Friday, yields on the three-month and six-month debt instruments closed at 5.298% and 5.569%, respectively, while the one-year tenor fetched a 5.67% rate.

“The local secondary market tracked the downward movement of the US Treasury yields on [the] escalating US-China trade war and the recent statement of Fed (US Federal Reserve) vice chairman of a possibility of a rate cut in the US,” the trader said.

Reuters reported that the US Treasury 10-year yield slipped to a multi-month low of 2.17% last Friday after US President Donald J. Trump threatened to impose tariffs on Mexican imports amid its ongoing trade spat with China.

Meanwhile, last Thursday, Fed Vice Chairman Richard Clarida said that although the current level of interest rates remain appropriate, the central bank could change its position if inflation stays too low or if global economic developments threaten its outlook.

Meanwhile, Robinsons Bank Corp. trader Kevin S. Palma said the rates of the T-bills could decline by 10-20 bps across the board from the previous auction.

“Another strong turnout is expected with the effect of the 1st RRR (reserve requirement ratio) cut now underway, and as investors continue to show appetite for short-term assets amid uncertainties surrounding the US trade outlook,” Mr. Palma said in a text message on Saturday.

The Bangko Sentral ng Pilipinas (BSP) slashed the RRR of lenders by a percentage point effective May 31 to 17% for universal and commercial banks, 7% for thrift banks, and 4% for rural and cooperative banks, unleashing billions of pesos into the financial system.

Mr. Palma added that demand will be reinforced by dovish remarks of BSP Governor Benjamin E. Diokno after he promised to cut policy rates further and lower banks reserves to spur economic growth as inflation is expected to cool.

In an interview with Bloomberg TV in Tokyo, Mr. Diokno said the BSP has “more room for monetary easing” and vowed more cuts, with the timing depending on upcoming economic developments.

The Treasury plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion in Treasury bonds.

The government is looking to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product. — Karl Angelo N. Vidal

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